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Luxembourg Rejects
Mittal's Bid for Rival Arcelor

Luxembourg's prime minister said his country rejected
Mittal Steel Co.'s
MT -0.84%
&euro;19.43 billion, or about $23.48 billion, hostile bid to acquire rival steelmaker
Arcelor SA,
citing worries over the fate of 6,000 Arcelor employees based in that country.

But Prime Minister Jean-Claude Juncker conceded that his powers to block the deal were limited because Luxembourg owns only 5.6% of Arcelor's shares. Meanwhile, the European Union's antitrust chief said she wasn't in principle opposed to a large steel merger, giving Mittal bid's continued life.

EU antitrust chief Neelie Kroes said she would meet this week with steel magnate Lakshmi Mittal, the company's chief executive. "I am not shocked by big, little or small mergers," she told the European Parliament's economic and monetary-affairs committee in Brussels.

The cash-and-stock bid, announced Friday, would create a new global steel giant. In Paris Tuesday, shares of Arcelor fell 85 European cents, or 2.9%, to &euro;28.90 each. In Amsterdam, Mittal fell 49 European cents, or 1.7%, to &euro;29.20.

Arcelor, created in 2002 from a merger of French, Luxembourg, Belgian and Spanish steel interests, has warned against its predator's "irregular" profitability, pledging to consider "all options" to foil the bid.

Speaking in Parliament after he met with Mr. Mittal, Luxembourg's Mr. Juncker said he wouldn't sell the government's shares to Mittal "for a short-term profit" and criticized the deal's hostile nature. But leaders of all the Luxembourg political parties acknowledged that, while they oppose the deal, they lacked the power to stop it. Both in Paris and Luxembourg, Mr. Mittal pledged to create a European champion, protect European jobs and respect European labor conditions.

French leaders are more outspoken against Mittal in public. Finance Minister Thierry Breton disparaged Mittal's offer. "I have seen many operations like that in my life," said Mr. Breton, a former chief executive of
France Telecom SA
. This "is the first time that I have seen one that seems so badly prepared," he said.

Mr. Breton's power is even more limited than the Luxembourg government's. The French government owns no part of Arcelor and analysts say it will find it dangerous to intervene, and would risk undermining its credibility to block even more sensitive deals it dislikes.

Also Tuesday, French Senate finance committee head Jean Arthuis said he wasn't opposed to the bid and he urged the two groups to exchange views on the deal.